Otmar Issing, former Chief Economist and Member of the Board of the European Central Bank, is President of the Center for Financial Studies at Goethe University, Frankfurt, and the author of The Birth of the Euro.

The weakness of the author's argument of "regional competitiveness" is shown when taken to its logical consequences: we should break e.g. Germany into smaller regions to compete against each other, giving them full "sovereignty" to set their taxes and their public spending. Following the same logic, we should further break up these regions into city-states and give them sovereignty and so on, until each citizen competes against each other citizen in a "sovereign" way. Competition is a necessary element of well functioning markets characterized by profit-seeking enterprises and individuals, not when applied to regulatory frameworks (or, at least, the author does not prove this). Competition does lead to wars though, as History has repeatedly shown.
That the "impetus of reform" in Europe has more effectively come from national governments results from this fragmented sovereignty and the great latitude governments have to avoid EU-directed reform when it damages their short-term, nationally-focused political interest (e.g. Germany and France breaking the Stability and Growth pact in 2003).
Providing the EU with legitimacy through directly elected officials and with greater power to steer reform and strengthen the common regulatory framework (including taxes) would indeed foster economic growth by removing some of the many remaining administrative barriers that still exist in Europe. It would also increase competitiveness by decreasing some of the overhead and the corruption associated with the many thousands of profligate national/regional politicians and bureaucrats making a mess of regulations and taxes.
National sovereignty is a relic of our tribal past. Together with the unimpaired goodness of subsidiarity, it is treated by some as a revealed truth. It is time we Europeans challenge it to leave behind the narrow-minded nationalism that has plagued our continent.

At first I thought there were good points in this article until I reached the end. After all it mentions tricky issues such as the balance between sovereignty at different levels.
There you find references to von Hayek and the apparently limitative list of factors driving economic success : property rights, competition, together with a growth-friendly tax system and solid fiscal policies.
There is not a hint of justification or how these might apply in a troubled but shared economic environment.
I think it would even be hard to explain germany's success with this limitative list.
This is just a pure example of neoliberal idelogy masquerading as discussion.
The problem is that we have already seen what skewed competition does in a shared economy with a common currency : Germany adjusted its costs unilaterally in 2001 just as it exported vast amounts of liquidity in booming southern European nations, fueling a huge cost differential and balance of payment imbalance.
We know how it ended.
This is what uncoordinated competition gives in a common currency area, we've seen it at work and this is not a solution, it is a problem to be solved.

Good article. The failure of the Lisbon agenda was rooted in its process and high level deduction of unmeasurable objectives. A lack of Ordnungspolitik is the cause of the current shortcomings. First comes the order, second the policy within the framework.

Great article!
I think the creation of the Euro was already a step too far in the direction of centralization. Further moves would increase the distance of understanding between elites and the people even more.

"Competition", or "cooperation", which one is the most foundemental defining force for the international relations among countries, or even for the relations among individuals? This philosophic issue is far more general than for discussion about the fate of the euro project; it is about the fate of the humankind.

Portugal shows how courts protecting "contracts" and powerful public and private unions can deflect "adjustment" away from their economic interests, leaving the process of adjustment to fall on the private sector, and in particular the most dynamic sectors of the private sector. But it is only the dynamic sectors of an economy that can re-start "growth." So growth remains stillborn as each troubled economy sleepwalks through austerity with the public increasingly disillusioned as the realization sinks in that there is no payoff for the sustained sacrifice; the doom loop becomes an iron constraint.

Across Europe, national governments sustain their political power by clientelist politics with powerful unions, citizens groups, monopolies and oligopolies, huge banks, and large state entitlement systems. The whole point of these arrangements is to avoid competition. The only way to restore competitiveness to such an entity is through devaluation, but that was the tool given up.

Further bureaucracy and policy making at the EU level will probably perversely strengthen the protectionist politics of the national governments.

To work at the EU level, real power has to be transferred from national governments to Brussels, not another layer of ineffectual power layered in at the EU level.

For the euro zone to work, some process that can effectively substitute for devaluation must be constructed. Wading through years of austerity does not seem to be the way forward.

Paul, Portugal doesn't show nothing, quite the contrary. We have improved in transparency, corruption and tax evasion. We have privatized most of our industries, yet before we were growing and now we are in a recession.

This adjustments are a myth, Germany is much less flexible then Portugal, with higher union power, yet they grow we don't.

But I agree that free markets are important, I just don't understand how the biggest attempt one free markets, namely the existence of fixed exchange rates and the euro gets a pass from most of the libertarian thinkers.

So Otmar Issing, ex-Chief Economist of ECB, is finally admitting his Libertarian ideology. Weidmann of Bundesbank is also a member of the same school...all students of their former Bundesbank boss, who ressigned from ECB Council and moved to Switzerland.

And, since Issing is indulging in EMU debate, let it be made clear that then Bundesbank didn't support EMU and introduction of Euro under Maastricht Treaty. They're dragged to the table by Chancellor Khol (CDU) and politically forced to accept the EMU.....

Under no circumstances, these Libertarians will have a chance to derail the EU Project whatever the current deficit of the EZ.

Europe is an impossibility, Northern chauvinism and the deep believe they hold that they are a part of a superior race led us to several wars and has risen to the surface once again on this crisis.

We don't have the same culture and we don't share the same believes. Some hold deeply to the notion of freedom, democracy and the principles of the french revolutions. Others wan't order at all cost and deeply believe in gene superiority and the high moral grounds of their own beliefs.

Europe is a continent, not a country. We can be friends but we don't have to be family, and we don't wan't to be family. Stop this terrible experiment and move towards the separation of Europe.

You don't have to resort to a minor thinker like Hayek or quote Atlas Shrugged to know that the Eurocrat Dictatorship they wan't to impose on Europe is not the way to go.

We could go back to Ancient Greece and beyond and still find the rewards competitive rivalries have on a society. The trick is to maintain the competitiveness while eliminating the wars.

Eurpope didn't need, and has not truly benefitted from such a large fixed currency regime, but a collection of smaller such regimes within the EU would be more ideal. Economies based on similar resources, and with similar cultures could coexist in a monetary union, so long as factors of production can (and DO) move freely across borders.

Although the ideas about an integral, mutually cooperating, influential Europe are good, it seems we try to get to it from the wrong direction.
When we build a house we do not start by putting the roof on, and even building the walls is only at a later stage.
First the house needs a foundation.
And the foundation for every human structure, human society is the human being itself.
We cannot force a monetary, economic or fiscal union, not even a political union on people if they are not prepared for it, if they are not choosing such structure, willingly, understanding it is in their best interest.
Only through positive motivation, by people who clearly understand what and why they are doing can a structure be sustainable.
This is why the whole European Project should have started with a clear purpose of achieving an fully integral union, with clear and honest reasons why it was beneficial for all.
This chance was missed, and to be fair at that time we did not know much about global, interdependent world, the whole idea was financial, economical, when the world was still "loose" with seemingly "unlimited potential".
But even now we still have a chance to turn the events around, to prevent the inevitable breakup and prevent unpredictable nationalistic, protectionist states many extremist political forces, who are gaining strength and support aspire for.
We still have a possibility to introduce an objective, transparent eduction system for all ages, cultures and social layers, helping people understand that in today's global, integral human network only full integration, mutually responsible and complementing decision making and action can provide a safe and sustainable future for all.
Today's public is open, have all the information at their fingertips, and they are fully connected virtually all over the world. Such a positive information sharing, educational program through all the mass media channels, instead of the present dumbing and consumer oriented brainwashing could achieve positive results within weeks.
And then a political process would have no problems achieving the necessary results, provided it is lead by hones, transparent politicians who are truly serving their voting public, and not serving their own self interest and personal legacies.

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